For a lot of families, the family budget process is pretty simple. It is simply - the money comes in and the money gets spent. The scenario rarely varies much - the income generally is fixed, and the outflow only seems to increase. If too much money gets spent, the shortfall gets added to the debt load.

As the debt load increases, more of the money coming in goes to paying the debt, which leaves less for spending, which increases the debt. Sound like a vicious endless cycle? It is, and many families can't seem to find their way out of the circle.

When asked "where does the money go?" most families will quickly respond "for necessities--food, clothes, things for the kids. Nothing is wasted." Yet, if asked to produce their family budget, many can not come up with a single scrap of paper indicating just where the money is going. Is it a fun task? Not really! Can it bring big rewards to your family finances? Absolutely!

Have a Family Financial Plan

Without a definite financial plan, your budget goals will probably be doomed. Like diets, many of us have started on family budgets only to see them wither away with time. If you are like most of us, you will probably need a program with some structure but will not force you to turn your life inside out. We've found a couple of excellent sources to get your start.

Review your credit report

Start the process by taking a look at your current Credit Report. A strong and accurate credit report is one of your most important financial assets. Not only is it a clear picture of your indebtedness, it can reveal problems or discrepancies which could bar your access to further credit. Getting a problem repaired now is always easier than attempting to do it after you have applied for a mortgage or car loan. Fing out what's in your credit report today - so it's 100% accurate tomorrow. Order a 3-credit bureau report from CreditReporting.com.

Gather financial records

The process of developing and maintaining your family budget is much simpler if you have the records of what you are currently spending on hand. Rather than saying "I think we spend about $300 a month on groceries," you will have the exact average monthly expenditures for various items.

Keep bills from utilities, physicians, service stations and any expense that varies from month to month. Once you have a running total for several months you can develop an average and adjust your budget up or down accordingly.

Evaluate expenditures for their value and necessity. For example, stop buying things that are rarely used, like expensive toys that sit in the corner or things for hobbies that were never taken up, 4 Wheel Drive vehicles that are a thousand miles from the nearest snowstorm.

Without a family budget, for getting the most value out of the things that you buy, and for your future--you will most likely find yourself in a constant uphill battle with the finance gremlins.

So where do you start to bring your finances under control? Begin by taking the time to work on (and live by) a family budget - everything else flows from there. Then, concentrate on how to save money on what you own or buy, and how to get the most purchasing power possible. All along the way, try to remember to include planning for the future.

Eliminate wasteful spending

Quit paying large sums of money for things that are rarely used--expensive toys that sit in the corner, things for hobbies that you never took up, 4 Wheel Drive SUV's a thousand miles from the nearest snowstorm. Stop "investing" in wasteful items and get rid of those that you have and convert them into cash.

Decrease debt

Collectively, we keep adding to our debt load month after month. At the same time, our saving rate is generally headed downward. With a super-strong (and growing) economy, you may be able to hold on to such a position for a while, but should the economy stagnate--or crash--you can quickly lose your footing.

Start the process by putting the reins on spending that increases your debt load, both on necessary items (like food and shelter) and those that are not necessities (like "toys"). With the aid of a family budget, begin to designate a specific amount monthly to decrease and pay off your debt - not paying the monthly minimums but adding enough to make a concerted effort at debt reduction.

Many families also take advantage of Home Equity Loans, where they can consolidate their debt into a lower monthly payment (and generally a lower interest rate) so that they can concentrate on debt reduction.

Pay off Debt

Concentrate on a plan to reduce your debt exposure. Consider consolidating your debt into one lower interest loan.

If you are like millions of other Americans, your credit card debt is likely excessive and the biggest problem. First, cut up all but one of your cards to avoid adding additional debt.

Next, if you are a homeowner, you may want to consider a small home equity loan, which can consolidate your debt and allow a single payment with a generally lower interest rate. In addition, your interest on such a loan may be tax deductible (check with your financial or tax advisor). Before you take a home equity loan, though, closely examine your financial situation and compare offers. LendingTree is a resource that you can use to submit a single loan request form and get up to 4 offers from competing lenders.

Spend less and Save money

Don't procrastinate: Because of compounding--the negative effect of compounding when it comes to credit (the longer you have the debt the more interest you will pay) and the positive effect of compounding with savings (the longer you have the savings the higher the return) to procrastinate is to cost yourself lots of your hard earned dollars.

It is amazing the difference getting control of your finances will make in your life. Less money will be wasted, so you may find you don't have to work as long (or hard) to make ends meet. That means you'll have more time to spend on the important things in your life. Your stress level most likely decrease in direct proportion to the decrease in bickering over family money.

Want to have more money for the things you want? Want to develop a savings or investment plan for the future? Start by taking a picture of your current financial situation to determine where the funds are going now and to begin to develop plans for reducing expenditures.

You can begin the process by printing out a budget form.

Then you can, with all concerned members of the family contributing, start to determine which budget items are necessities, which are "luxuries" (and perhaps expendable) and where expenses can be cut or eliminated.As you begin the focus on your budget, we have a few hints on some efficient purchasing tactics as well as saving money on those items that you must buy.Learn how to save money shopping online

Money-saving tips

Start with the biggest items first, where the most potential for savings is, and move down the scale to the less expensive items. Even a moderate savings on one of the larger items (houses and cars, for example) can bring a big reward. You can maximize your effectiveness by starting to save on some of the smaller items--they will add up!

House Mortgages

If you own a home, your mortgage is probably your biggest expense. Is it at the most advantageous rate? Surprisingly, many families don't know the answer to this question, or if they are aware of current mortgage rates, think it's too much of a hassle to do anything about. If you purchased your home with a mortgage for, say, 9 3/4% interest while 7 3/4% is currently available in the market, you may be paying an expensive price for not investigating your options.

Example: in the example above, the difference in payments between a $100,000 mortgage at 9.75% and at 7.25% amounts to $142.74 per month, or $1712.88 per year. Even if you plan to stay in the home for only 8 more years, the savings (less any closing costs) amount to over $13,700.00. Can you say "a good start toward college education costs?

Planning for higher education

When should you start making plans for a child's higher education? Probably the best present you can give your child on their first birthday is the start of a college fund! The costs for a higher education are increasing much higher than the inflation rate, so you will need to consider your children's needs as soon as possible whether it's in the form of partial student loans, a 529 plan, or savings. With the way costs are increasing, it is becoming less and likely that parents will be able to fund all of the costs of a higher education, as was often the case in the past. More likely the average student's needs will be handled by a combination of parental funds (whether saved or borrowed), scholarships, grants and student loans. More students than ever will probably be working in order to help put themselves through school.

Using a saving and investment program and by taking advantage of compounding, not only will the amount you need to put aside be much smaller on an annual basis (more years) the funds you do put aside will have a much longer period of compounding. If you wait until age 12 to begin a savings/investment plan for your child (about the time many families begin to consider it) you will have to save almost 5 times as much--nearly $500 per month, to have the same amount of funds available had you started the process at age 1.

A great source of additional information is Financing College: How Much You'll Really Have to Pay and How to Get the Money (Financing College), whether you are planning for a preschooler or just beginning the tuition process.

College Assistance Guide for People with ADHD

Prepaid Tuition Plans

In the last few years a number of states have begun to offer prepaid tuition plans for those parents who want to spread college tuition costs out over a number of years while their children are growing. The plans will vary widely from state to state and have different policies regarding transfer of funds and cancellation. Make certain you get all of the particulars before you begin to invest in one of these plans

Home Repairs, Improvements and Remodeling

Normal maintenance on a home is expensive enough. When you need to make repairs, improvements or remodel, the cost can go through the roof! Getting comparisons is the key here--getting and accepting only a single offer can be very expensive. And, without other bids with which to compare it to, you won't even know your loss! If you need work done to your home, Service Magic has an excellent (and totally free) resource that will secure up to 4 competing bids from pre-screened contractors in your area. - http://www.servicemagic.com

Cars

For most families, the next biggest expense is their car(s). Mistakes made here can often be as costly (on a monthly basis) as mortgage miscues. Take a look at the vehicle(s) you presently own. Do you own too much vehicle for your needs? Do you have equity in a car that you no longer use frequently? Could you downsize and save money, not only in monthly payments but also in maintenance, insurance and operating expenses? On the cars that you own and will be keeping for a while, are you getting the best deal on those repairs and maintenance?

The habit of always using the same facility without investigating alternatives and looking for special savings plans can be an expensive one. Would an extended warranty save you money on your repair bills. For some it might be a wise move, for others there would not be considerable savings.

Banking

This is one area that many of us simply "pay the tariff"--whether it is in high monthly fees or lower interest rates--simply due to habit. Could you be earning interest on your accounts instead of simply paying monthly fees? Online sources often have some of the highest interest rates available. If you are looking to save money, then consider ING Direct, where you can get great rates with NO fees and NO minimums.

Credit Cards

For many families, one of the biggest financial drains is credit card debt. Taking control of the problem involves two steps: First, you must stop spending foolishly and second, you must dump all of your high interest credit cards. Paying a large portion of your monthly payment only to interest is not only expensive, but makes it next to impossible to pay down the balance. You can find more hints on credit cards on the page devoted to that subject.

Insurance

Most of us pay our automobile and homeowners insurance premiums by habit, rarely if ever making comparisons. With many families insurance costs totaling over $2000 a year, even a 15% savings equates to $300 annually. Some hints from the Insurance Information Institute on saving money on your homeowners insurance include:

Be sure to shop around. It may take a little time, but it could save you money. The insurer you select should offer both a fair price and excellent service.

Raise your deductible. Deductibles on homeowners policies typically start at $250. By increasing your deductible to $500, you could save up to 12%.

Beef up your home security. You can usually get discounts of at least 5% for a smoke detector, burglar alarm or dead-bolt locks.

For automobile insurance the Insurance Information Institute recommendations include:

Shop around. Prices for the same coverage can vary by hundreds of dollars from company to company, so it pays to shop around. Surf the net, ask your friends or call your state insurance department for ideas about companies and agents to contact.

Ask for Higher Deductibles. By requesting higher deductibles on collision and comprehensive (fire and theft) coverage, you can lower your costs substantially. For example, increasing your deductible from $200 to $500 could reduce your collision and comprehensive cost by 15% to 30%.

Take Advantage of Low Mileage Discounts. Some companies offer discounts to motorists who drive fewer than a predetermined number of miles a year.

Food

Not only do you need to eat food to live, the expense of it for the average family can eat you alive! Since food is a necessary and recurring expense, just saving, for example, $20 a week on your purchases can convert to over $1000 in savings over the course of a year. Want a blueprint to save a ton of money on your grocery shopping? See the ebook SaveThousands Grocery Shopping (and Cook Good Food, Too!

Try to plan in advance. By knowing what you need, you will be able to buy in larger quantities (almost always less expensive) and cut down on convenience food purchases (always more expensive). Once you get into the habit, you can plan 2 weeks of meals including making your shopping list in less than a half-hour.

See the ebook Save Thousands Grocery Shopping (and Cook Good Food, Too!) I have developed a system of shopping that has literally given me a power I never knew I had, and I want to share it with you. Every time I go shopping I come home with delicious food for my family at a fraction of the cost the grocery store would have liked me to pay! -

Telephone

In most areas of the country, your local phone service is currently regulated and has a fixed price. The difference in long-distance costs, though, can be eye-opening. Many consumers simply stick with their current long-distance carrier because it is convenient and they feel that it would be a hassle to change. By shopping around, however, you may find some considerable savings that can really add up. We were able to find a plan that gives savings of about $16.75 a month and $200 a year, a fairly considerable amount. Switching over was simple and not time consuming--a pretty good return on time spent! - http://www.qksrv.net/click-2308-5596649. Long distance and roaming charges can add up, so while traveling you can also take advantage of service's like T-mobile prepaid phones to rid yourself of the monthly surcharges and fees.

Clothing

Although many consumer items have actually reduced in price over the last few years (most notably, computer and electronic items) the cost of clothing has seen a continuing upward spiral. In addition, a purchase price that not too long ago bought a good quality garment now seems to buy virtually "throw away" clothing. With some planning, though, it is possible to maintain clothing purchases that are in line with your family budget.

Buy separates that coordinate. You can make numerous combinations with a few well matched items. For women, jackets, slacks, skirts and blouses can be mixed and matched to create many different outfits. Plus you can change the look of these outfits with accessories such as jewelry or scarves. Men's clothing offers a wide variety of separates that can be coordinated: blazers, slacks, shirts and ties can all be interchanged to create a versatile wardrobe with a minimum of expense.

Buy a season ahead. Buy next year's winter clothes at the end of this season and save. The styles won't change that much (if at all) and you will pocket a big difference in the price.

If you are "hard" on clothes, buy quality. Buying an $80 pair of shoes that will last saves money in the long run instead of having to buy 3 pairs of $35 shoes that don't hold up.

Stay away from trendy fashions. Stick with the basics. You can always be sure you clothing styles will last from year to year when you buy perennial stand-bys such as medium length A-line skirts and solid tailored blazers for women or neutral color shirts and tailored to semi-tailored sports coats for men.

Travel

Price differences here can be enormous. The difference in costs on the same trip--same airline, same hotel, same car rental--between two travelers can run into the thousands of dollars. Take a little time to comparison shop to assure the best possible deal. Some travel resources that we've found effective include Travelocity, LowestFare and Priceline .

Comparison Shopping

It used to be that comparison shopping was a long and drawn out process. Driving from one store to another or making numerous phone calls could be a real time waster. Even if you were able to make an adequate comparison, sometimes it wasn't worth the hours you needed to invest to get the comparison. The Internet has changed much of that. Now you can make quick comparisons on most items, usually within a matter of minutes. What would once have taken hours to accomplish now happens at the click of a mouse, a real time and money saver. Don't forget online resources. For example, a site such as Ebay could save a lot of money for a couple of reasons: First, you can make comparisons among a number of sellers and second, you may be able to find second-hand merchandise which can save you a bundle.

Save money on purchases

Nearly every family in the world wants to be wise purchasers, but few are able to achieve that goal. Instead, we look around our homes and take inventory of items that we paid too much for, things we purchased that we didn't really need, and broken or non-functioning items that we may have "saved" on when purchasing but which are now costing us money in repairs or upkeep. In addition, our accumulation of "things" not only eats into our family budgets, it often clutters our lives with junk we eventually realize that we really didn't need.

Distinguish between Wants and Needs

You will save a ton of money if you don't mistake wants for needs. Needs are pretty simple to identify--those items that are necessary to sustain the family: Shelter, food, clothing, transportation.

Wants are those things that enhance or possibly improve our family life. A car is a need. A $40,000 Sport Utility Vehicle is a want, even if a lot of people don't see it that way. Have you ever heard (or said) "I absolutely need...?" when the actual meaning was "I really want?"

This is not to suggest that you shouldn't be able to have the things you want--only that to delude yourself into believing that a want is a need--and busting your budget in the process--is a recipe for financial disaster.

Group purchasing power

There are a number of ways to accomplish this. Credit Unions, for example, will often have group purchasing agreements on certain items. Warehouse clubs are also a good source. Although you often have to buy in slightly larger quantities, they will often save you money on many everyday items. If you aren't a member of one, visit one of the clubs, get a " guest pass " and see if joining would be a money saver.

Is less better? Perhaps it was due to the late, great booming economy, perhaps "keeping up with the Jonesism", maybe its ego, but for many of us, we often seem to insist on the biggest and the best, no matter what the cost. When a $15,000 new car may be more than acceptable, we stretch the seams of our budget to afford a $25,000 vehicle. We buy $25 shirts with $35 designer labels attached. We opt for the $100 dinner at the trendy restaurant when a $20 meal would have been just as delicious. Think about where you are spending the family money--and how--to see if there couldn't be savings found with minor changes in habits.

Try before you Buy

This goes a long way in helping to avoid the silly purchases of things you rarely or never use. Before you buy something, especially items with big price tags, borrow one, rent one or try one out before you plunk down the cash. If you are bored with it, or determine that it truly is not something you need before you buy it (and you will be on a certain percentage of items) you will definitely be bored with it, or find it not that necessary, after! Take this example: You feel that you absolutely must have a new Jet-Ski, at a cost of $4500 (and that is before financing and taxes). You go to the lake, rent one, and 45 minutes into a one hour rental you are saying, "geez, this is a long hour." Saved: More than $4500 (a year of college fees for the kid!)

Investing

A New Savings Plan for the Disabled

Many families want to begin the process of getting their investments to work for them, but are unsure where to start. Their capital may be in low-yielding savings accounts (or worse, in no-yield checking accounts) where they are not keeping pace even with inflation, let alone gaining asset value. Comparing some of the most popular investment strategies and sources is the first step in taking control of your investments.

Insured Savings and Money Market Accounts

Although their return may be more modest than other investment strategies, insured savings accounts and money market accounts offer the most secure home for your money since your investment (up to $100,000) is insured by the Federal Deposit Insurance Corporation (FDIC). In addition, these accounts offer flexibility in that you can deposit and withdraw money on your personal schedule. Certificate of Deposit (CD) accounts offer a bit more yield, but are "locked-in" for periods of 1-10 years. For money market accounts and interest checking accounts, see the sections devoted to money markets and interest checking at BankBranchOnline.com. For savings accounts, we've found a great source at ING Direct. You can link directly to an existing checking account and get great rates on your savings with NO minimum balances and no fees.

Stocks and Bonds

For many families, just getting started in stock ownership is the biggest hurdle. With many stocks still trading in the $50+ per share range, investing in even a single share in a single company can be difficult. Dollar-based investing may be a good strategy. Dollar-based investing lets you buy shares of stock in dollar amounts. This allows you to invest according to your budget by purchasing partial shares. You can make a recurring investment every month, or make one-time transactions when they are convenient.

Mutual Funds

One of the most popular investment strategies is mutual fund ownership, with thousands of different funds and "fund families" available. Mutual funds allow an investor to "spread out" their exposure over a portfolio of individual stocks held by the mutual fund. If you own, for example, 1 share of XYZ Corporation and the stock value falls by $2, your investment has lost $2 in value. If, however, you have invested in a mutual fund that has shares in XYZ Corporation as 1% of its total portfolio, the $2 loss on XYZ corporation is considerably less. If you want to invest in mutual funds, you will either need to find a full-service broker who can handle your investment (and you can allow a hands-off approach) or you need to get educated. With so many choices available, it just makes sense to be market wise.

Real Estate Investment

For those looking for a bit more active strategy of investment, real estate can be an excellent avenue. When it comes to investment, though, buying and managing real estate is quite a bit different than purchasing your personal home. Low 3-5% downpayments are common in personal home ownership but are virtually non-existent in investment real estate, where downpayments of 20% or more are fairly standard. In addition, you will need to qualify for both your current home mortgage and the investment mortgage largely on the basis of your personal income until you have a track record of managing properties. As a long-term investment, though, real estate can be an excellent source of both income and equity growth.

Planning for the future

Many of us are so wound up in the day to day process of family finances….paying the mortgage, fixing the car, feeding and clothing the children…that when it comes to making plans for the future, both time and money are short. Yet for every family there is an inevitable cycle that begins with its establishment and continues through its various phases to retirement and possibly elder care. While its understandably hard for the young family to think about taking valuable dollars away from today's needs to concentrate on something that seems so far into the future, planning for the future may be one of the most important budgetary issues you face.

As interest rates have declined, real estate values increased and most importantly, annual college costs gone through the roof, parents have looked for ways to pay for, or assist their children wanting to go to college by taking advantage of a home equity loan. Although a home equity loan can be an excellent source of funds, it should not be taken lightly since you will be adding additional debt to your home. This is especially important if you have recently purchased the home and do not have a great deal of equity. For many parents, though, it can be another avenue for funds, along with traditional college loans and savings. You can find out more information on home equity loans (and lines of credit) as well as get up to 4 offers competing for your business, at LendingTree.com.

Planning for Retirement

You seem to hear more and more discussion about it. "The Baby Boomers just aren't making enough preparations for retirement, and it is coming sooner than they think." If you want to work until the day you reach the Happy Hunting Ground, then this section is probably not for you. If, however, you have some hopes of enjoying your years after work (or are considering an early retirement) then a quick checkup of your plans is probably in order.

As a nation we are going to:
Live longer.
Need more money to maintain the lifestyles we have established.
Need to deal with the erosion of classic retirement plans.
Possibly have to deal with the collapse or shrinking of the Social Security system as we know it.

Collectively, as a lifestyle, many of us are:
Spending more on consumer goods that don't last.
Saving less and less.
Increasing our debt load by leaps and bounds.
Delaying any retirement planning.

Assume that the majority of funds necessary for retirement will be your responsibility. Pension funds can change. Social Security may be limited (already the retirement age for full benefits is slowly being pushed back later in life). Things that you may be counting on (like inheritances) can disappear. If you do the majority of the planning for yourself, any other funds that may become available as you age become "gravy" rather than a necessity.

Start early in life. The earlier you begin, the less you will need to invest on a regular basis and the more money you will have available for current needs. You may be saying, "well, gee, that's obvious." But then why do so many 30 and 40 year olds have absolutely no planning done?

Compounding example:

Take advantage of the compounding principle by starting as early as possible and getting a good mix of both safety and adequate returns on your investment. the "Rule of 72" lets you compute how quickly your investment will double in value. By dividing the number 72 by the rate of return will tell you how many years it takes to double the investment. For example, at 5 percent per year, you will double your money every 14.4 years (72 divided by 4 = 14.4). At 10 percent, your money will double every 7.2 years.

If you haven't already done so, begin the process of developing a family budget. Without knowing where you income is going now--and making plans to adjust expenses if necessary--most retirement planning will be futile. Excellent books on retirement planning are The Wall Street Journal Guide to Planning Your Financial Future, 3rd Edition (Wall Street Journal Guide to Planning Your Financial Future) and the Baby Boomer Retirement: 65 Simple Ways to Protect Your Future

Compute your estimated Social Security Benefits. This is as easy as requesting a Personal Earnings and Benefit Estimate Statement (PEBES) from the Social Security Administration.

It is difficult trying to juggle both long-term goals and everyday needs and requirements, but the earlier you concentrate on the process the longer you will have benefits from your work. Does the idea of early retirement excite you? How about a fully paid for higher education by the time your child enters college? Beginning now instead of later takes you one step closer to your goals.

Stop "investing" in wasteful items and then get rid of those that you have and convert them into cash by selling them.

Start putting the reins on spending that increases your debt load, both on necessary items (like food and shelter) and those that are not necessities.

Save money on your every day spending and get control of your purchases. Then, with the aid of a family budget, designate a specific amount monthly toward debt reduction, not just paying the monthly minimums but adding enough to make a concerted effort at debt reduction.

Consider home equity loans that can consolidate your debts into a lower monthly payment (and generally a lower interest rate) so you can concentrate on debt reduction.

Incorporate Your Goals

Family budgets that include established short or long term goals are always the most effective. For example, you may decide that "we want to trim enough from our current spending so that we can buy a $2500 Certificate of Deposit within 6 months to begin a college fund." or, "the savings from our budget will pay for our entire vacation next August so that nothing will be added to the credit cards."

Discussion is important here so that everyone focuses on the same goal or goals. Start slowly with a fairly easily attainable goal and then "test" yourself with a more difficult (and rewarding) goal as you get more proficient at your budgeting process.

Develop Your Family budget

Just the idea of a budget makes a lot of families shudder. Many feel that it will be too restrictive and limiting. They assume that they will lose too much of their spending freedom, taking away some of the pleasures in their lives.

In reality, an effective family budget does the opposite: by keeping track of your expenditures, it allows you to concentrate on those items that bring the highest reward, both financially and personally.

An effective family budget puts YOU in control of your finances, rather than letting the control slip into the hands of chance.

This is an easy, yet complete book for balancing your budget. You are introduced to a method of record keeping that is very flexible and yet at the same time thorough. It walks you through the easy steps of determining your past income and spending history. Then it guides you in planning for the next year. Space is included for recording your monthly budget and actual income and expenditures. Makes tax time a snap.

About the Author
Dianna Barra, M.S. taught consumer math at a junior college for five years. During that time she realized there were no decent budget books available for use by her students to learn how to handle their finances. So calling upon her teaching experience and the many budget seminars that she had attended, she developed a book that filled this need.

Your Money or Your Life: Transforming Your Relationship With Money and Achieving Financial Independence by Joe Dominguez and Vicki Robin shows how to frame personal finances in a whole new context, how to downscale spending while maintaining a sense of abundance.

There's a big difference between "making a living " and making a life. Do you spend more than you earn? Does making a living feel more like making a dying? Do you dislike your job but can't afford to leave it? Is money fragmenting your time, your relationships with family and friends? If so, Your Money or Your Life is for you.

From Your Money or Your Life, you will learn how to: